Higher oil prices are less of a threat to world economic growth than the creeping rise of interest rates, according to a report released today by Bank of Nova Scotia.

“High and volatile energy markets should not derail the expansion underway throughout most of the world,” said Pablo Bréard, vp, international research, Scotiabank, in a release. “However, with interest rates beginning to move higher globally, as central banks take action to fight inflation, the pace of international growth will undoubtedly slow.”

The outlook remains favourable for continued economic growth despite these stresses, the report says.

In the United States, the economy will likely moderate closer to its potential, with government spending on post-hurricane reconstruction partially offsetting an expected slowing in consumer purchases.

The report highlights that global growth will be more evenly distributed in 2006. The most dynamic engines of growth are in the developing world. Countries such as China, India and Russia are expanding at paces two to three times North America’s rate.

“The increased world appetite for energy and other natural resources is a boon for Canada. We are in a good position to benefit from the increasing global demand,” concludes Bréard.